App-based companies in the gig economy

Laura is an employment and work health and safety (WHS) lawyer and helps employers find practical solutions for their workplace issues. She advises on incident response, due diligence, bullying and harassment issues, directors’ and officers’ duties, and policies and procedures.

In Australia and overseas, workers for app-based companies are engaged as self-employed independent contractors, as opposed to employees.

This classification was recently challenged in a decision in the United Kingdom, which involved two Uber drivers. It was determined that the Uber drivers in this case were not self-employed but workers entitled to minimum wages, paid breaks, and holiday and sick pay. Uber UK is appealing this decision.

With test cases being filed in the United States against food delivery companies DoorDash and GrubHub, and law firm Maurice Blackburn investigating the classification of Deliveroo and Foodora riders in Australia, it is only a matter of time before the status of workers engaged by app-based companies in Australia is also tested.

While the app-based company business model and technology may be new, the Fair Work Commission and courts are experienced at applying the 'quacks like a duck' test in circumstances in which what is documented in the contractual relationship bears little resemblance to the actual work relationship.

Independent contractor or employee?

As the frequently cited statement by Justice Gray goes, "the parties cannot create something which has every feature of a rooster, but call it a duck and insist that everybody else recognise it as a duck".[2]

More recently, Fair Work Commission deputy president Gostencnik said: "That which has webbed feet, waddles and quacks is likely to be a duck. Putting a saddle on it and calling it Phar Lap will not change that fact."[3]

The commission and courts look beyond the contractual description of the relationship and into the real substance of the parties' roles, functions and work practices. The judiciary looks at the totality of the relationship between the parties, and does so by considering the following factors:

the level of control over when, where and how work is performed

the worker's ability to negotiate their own rates

the worker's ability to delegate the performance of part or all of the services

the worker's ability to generate goodwill and carry on the business as a going concern

whether the worker is paid on a result or time basis

whether the worker owns and uses their own tools, equipment or premises for the purpose of performing the service, and

whether the worker is the emanation of the head company to the world at large – for instance, is the worker required to wear a uniform?[4]

Are Uber drivers employees or contractors?

The position in the UK

In the decision of Aslam, Farrar & Others v Uber B.V., Uber London Ltd and Uber Britannia Ltd,[5]a UK tribunal found that Uber's written contract with its drivers did not correspond with "practical reality"[6] and accused Uber UK of "resorting in its documentation to fictions, twisted language and even brand new terminology".[7]

Uber UK argued that it was not bound by employment obligations because, rather than drivers providing a service to Uber, Uber was providing a service to drivers by providing access to customers and a payment system via its app.[8] Uber's case was that it was not a business providing transportation services, rather a technology company providing a platform to connect willing workers to paying customers.

The UK tribunal found it was "unreal" to deny that Uber was in business as a supplier of transportation services.[9] It said the "notion that Uber in London is a mosaic of 30,000 small businesses linked by a common platform is to our minds faintly ridiculous".[10]

The tribunal also rejected Uber UK's argument that it helped drivers grow their own businesses, saying this was not supported by the facts, such as rules that drivers could not solicit the custom of particular passengers or contract on any terms or conditions other than those set by Uber.

The position in the US

In 2015, the Labor Commissioner of the State of California reached a similar finding in Barbara Ann Berwick v Uber Technologies, Inc., A Delaware corporation, and Rasier-CA LLC, a Delaware limited liability company.[11]

In this case, Uber ran a similar argument that it provided a technological platform that private vehicle drivers and passengers use to facilitate private transactions,[12] and that it exercised very little control over driver activities.[13] Uber denied exerting control over the hours worked by its drivers and said it did not reimburse drivers for expenses relating to operating their personal vehicle.[14]

Similar to the finding in the Uber UK decision, the Labor Commissioner rejected Uber's argument that it was nothing more than a neutral technological platform. It found that Uber was in the business of providing transportation services to passengers and that, without drivers, its business would not exist. The reality was that Uber was involved in every aspect of the operation, according to the Labor Commissioner.

As a result, the Labor Commissioner found that the plaintiff driver in the matter was Uber's employee under the applicable US labor law. Uber is appealing the decision.[15]

If it quacks like a duck...

The lesson for Australian businesses that engage independent contractors, either under the gig economy business model or through traditional arrangements, is that the courts and commission will look beyond the contractual description of the relationship and into the real substance of the relationship. If the reality is that it has webbed feet and quacks like a duck, then, technology aside, it probably is just another duck.

This article was originally published in the March 2017 issue of Proctor and is republished here with their kind permission. Click here to read the article.

Notes

[1] The gig economy encompasses people working independently (freelancing) – often utilising technology – rather than in traditional employment arrangements.